Analysing the Trade Aspects of Indian Pharmaceutical Industry

Presented by: Sushant Mishra sushant_mishra1@yahoo.com

“The Indian pharmaceutical industry is a success story providing employment for millions and ensuring that essential drugs at affordable prices are available to the vast population of this sub-continent.” - Richard Gerster

Introduction

Indian Pharmaceutical Evolution
Phase V Phase IV Phase III Development Phase Phase II Phase I Early Years Government Control •Indian Patent Act –1970 •Process development •Production infrastructure creation Growth Phase Innovation and Research

Indian companies seeking overseas markets
• Aggressive Growth Strategies
• For building a global scale – Ranbaxy aims to be one of the Top 5 • For market entry – acquiring local co or setting up subsidiaries

• Matrix (now part of Mylan)
• Acquired Docpharma (Belgium) for US$ 263 million in 2005.

IMPORTS
• Its imports consist almost entirely of life-saving drugs and new generations of formulations that are under patent protection by innovator companies • These include mainly:
• Anti-cancer • Cardiovascular • Anti-hypertension drugs

GENERAL PROVISIONS
• Exports and Imports shall be free, except where regulated by FTP; free unless regulated or any other law in force. • All imported goods shall also be subject to domestic Laws, Rules, Orders, Regulations, technical specifications, environmental and safety norms as applicable to domestically produced goods • Any goods, export or import of which is restricted under ITC(HS) may be exported or imported only in accordance with an Authorization or in terms of a public notice issued in this regard.

PROMOTIONAL MEASURES
• Central Government aims to encourage manufacturers and exporters and Quality to attain internationally accepted standards of quality for their products. • Central Government will assist in modernization an up gradation of test houses and laboratories to bring them at par with international standards. • Exporters are eligible for STATUS CATEGORY

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A Status Holder shall be eligible for following facilities: i) Authorization and Customs clearances for both imports and exports on self-declaration basis ii) Fixation of Input-Output norms on priority within 60 days iii) 100% retention of foreign exchange in EEFC account iv) Enhancement in normal repatriation period from 180 days to 360 days;

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EPCG
• Under this scheme the exporter is allowed to import capital goods use during Pre – production, Production and Post – production stage against payment of 5% customs duty subject to fulfillment of export obligation • The export obligation is 8 times the duty saved • The export obligation is 6 times in case of SSIs and agro units engaged in exports • The period for fulfillment of export obligation is 8 years • The period for fulfillment of export obligation is 12 years when:
• • • • EPCG authorization > 100 crores Located in Agri export zone Unit under revival plan of BIFR Unit is a cottage or tiny sector unit

Duty Exemption Scheme
• The export enterprise is allowed to make duty free import of inputs which are directly used in the export product at the pre-shipment stage • The details of the inputs are given in the Handbook of Procedures (Vol. II) in the form of Standard Input-Output norms (SION)

Duty Remission Scheme (DEPB)
• This scheme offers the facility for duty free import of inputs at the post shipment stage under Duty Entitlement Passbook Scheme • It is valid for 24 months from the date of issuance • This facility is provided by way of grant of import duty credit against the export product • DEPB has been extended till 31st December of 2009

Other Provisions
• Import of Bonafide Trade Samples is allowed without limit except in case of vegetable seeds, bees and new drugs • Export of Bonafide trade and technical samples of freely exportable item is allowed without any limit • The exporter is allowed to replace damaged or defective good free of charge • Exporter is allowed to import damaged goods for repair and later export them back without any license based clearance • The exporter is allowed to trade goods from another country to a third country without license (if item is non restricted) • Private bonded Warehouses for Export and Import

Pharmaceutical Export Promotion Council (Pharmaexcil)
• • Objectives The objectives of the Council (Pharmexcil) are to extend all assistance to the pharmaceutical industry in India to explore their opportunities. Services Extended include: (a) Trade Enquiries received from foreign Embassies /Buyers (b) Market Development assistance as provided by Ministry of Commerce for business tours to foreign countries. (c) Arrange one to one Buyer/Seller Meets in India/Abroad. (d) Arrange Exhibitions in India and Abroad for market promotion. (e) Assist in Regulatory matters with domestic and Foreign Government agencies. (f) Provide financial assistance for Product Registration charges, Research and Development, Product showcasing etc. as per rules. (g) Arrange Conferences/Seminars in domestic and foreign countries for market and technical up-gradation of information

Working Groups and Joint Working Groups
India-EU Joint Working Group • Setup in 2006 • Co-Chairmanship of Joint Secretary (Pharma) • D.G. Enterprises - counterpart from the EU side. • The first meeting - 18th July 2006 at Brussels - the Terms of Reference for the JWG was finalized. • Its 2nd meeting was held on 30th and 31st May 2007 at New Delhi

Working Groups and Joint Working Groups
Indo Tunisia Joint Working Group • Constituted since 2004 • Three meetings have since been held. • The Tunisian Government has given permission to 5 Indian Companies for registering their products in Tunisia

Working Groups and Joint Working Groups
Sub Group on Pharmaceuticals under the aegis of Indo-Russian Working Group on Trade and Economic Cooperation (IRWGTEC) Provides inputs to IRWGTEC. The issues discussed were various areas of cooperation like: Promotion of Trade and exports of pharmaceuticals to these countries Joint Venture Cooperation in manufacture as well as R&D Regulatory cooperation HRD and Training Exhibitions and Trade Fairs.

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Working Groups and Joint Working Groups
Sub Group on Pharmaceuticals and Medical Devices • High Technology Cooperation Group (HTCG) on Biotechnology and Life Sciences Working Group has recently been augmented by two subgroups covering Biotechnology, Pharmaceuticals & Medical Devices. • The nodal point on the U.S side is Mr. Jeffrey Gren, Director of the Commerce Department (Office of Health & Consumer Goods). • Joint Secretary (Pharma), from this Department has been nominated as the Nodal Officer for the Sub-Group on Pharmaceuticals and Medical Devices. • The alternate officer will be the concerned Deputy Secretary (Pharma) in this Department. • The last meeting of this group was held on 13th Dec. 2007.

Working Groups and Joint Working Groups
Working Group on Drugs and Pharmaceuticals • Chairmanship of Secretary (C&PC) • The Department of C&PC constituted three Sub Groups for different Terms of Reference (TOR) of Working Group. • Report of the Working Group on Drugs and Pharmaceuticals for the eleventh five-year plan (2007-12) has already been submitted to the Steering Committee, Planning Commission on 1st December 2006.

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Some of the important measures for the welfare of common man and ensuring growth of the domestic Drugs and Pharmaceuticals Industry as envisaged in the Report include: I. Creation of 5 new NIPER like institutions to generate requisite HR in this field. II. Interest subsidy to Pharma Industry for Schedule M compliance. III. Setting up 10 Pharma Parks to provide global environment to the Pharma industry. IV. Creation of District Drug Banks for BPL families. V. Provision for Price and availability of Cancer medicines Fund. VI. Measures for Pharma PSUs welfare including revival of sick PSUs. VII. Strengthening and up gradation of infrastructure at NPPA and NIPER and Pharmexcil.

Pharmaceutical Export Promotion Cell
• • Objective - Boosting pharmaceutical exports and to act as a nodal center for all queries/issues regarding pharmaceutical exports. The Cell collects statistical data on export and import of pharmaceuticals in the country and provides commercially useful information for developing and increasing drugs and pharmaceutical exports. It is acting as nodal center for all queries and issues regarding Pharma exports. The Cell also undertakes promotional activities for acceleration of pharmaceutical exports and considers suggestions for modifications in EXIM POLICY from the industry. The Cell has also been entrusted with the organization of seminars and workshops on standards, quality control requirements of important countries so as to prepare the domestic companies for exporting their products. Database on the status of pharmaceutical industry in many countries is available in the cell for the benefit of Indian exporters. Events - GCC Africa and Latin America meets at Hyderabad and CIS meeting in Mumbai were organized.

Incentives to BTP
1. Taxation on biotechnology products New biotechnology units will not be taxed for the first five years. 2. Fiscal incentives All inputs as well as capital goods, including captive generation sets, during the implementation stage will be exempted from the payment of entry tax, which can be up to 7 years or during the construction period whichever is earlier. 3. Captive generation Captive generation sets to be installed by biotech-industry will be eligible for exemption of electricity tax for a period of seven years. 4. Pollution control Biotechnology units must fulfill the required norms regarding pollution control depending on its specific nature. The State Pollution Control Board will act as a facilitator in guiding these units to conform to the relevant rules and regulations. It will also act as a single window agency to co-ordinate the approval process.

Incentives to BTP
5. Uninterrupted power These industries will be given top priority in sanction and servicing of power. Biotechnology companies will be treated as industrial and not as commercial consumer and accordingly electricity tariff will be levied on such companies. 6. Relaxation in zonal regulations For registered Biotechnology units within declared Biotechnology Park/Industries area, relaxation of FAR to the extent of 50% of the prevailing norms shall be given.

Incentives to BTP
7. Simplified labour laws The labour laws will be simplified so as to enable employment of women during the evening hours. 8. Concession for creating employment Expansion, diversification and modernization of existing small scale industries would get a concession on registration charges.

Incentives to BTP
The following consessions will be offered to the biotechnology park: • Exemption on payment of entry tax on machinery/equipment/capital goods and construction materials, for a period of 7 years or till the date of completion of the project, whichever is earlier on the condition that each invoice should not be less than Rs.25 lakhs or Rs. 10.00 lakhs in case of construction materials. • Up to 50% exemption from the payment of stamp duty and registration charges. • In case of first lease as well as subsequent lease to biotechnology companies, concessions will be available for biotechnology parks certified by the Department of Science & Technology.

Special Initiatives
• The excise duty has been reduced from 16% to 8% in 2008 • Increased outlay for HIV treatment • 20 more Biotech Parks to be set up • Incentives under consideration
• 30,000 crore relief package to help the pharma sector • Increased Grace period of upto 25 days for Foreign Exchange Payments • Reduced Interest Rates under DEPB

RECOMMENDATIONS
• Extension of deduction of 150% of R&D expenses: This would encourage more and more companies to invest in R&D. To rationalize Drug Price Control Order (DPCO). The objective of the price control was to ensure adequate availability of quality medicines at affordable prices. An academic –industrial relationship can be further explored, on the lines of US model, where the universities are the sites of innovation and the industry commercializes the product. Property Rights (IPR) and get a share of the profits. Academic institutions will then become the engines of entrepreneurship. Income tax exemptions should be given on clinical trials and contract research done outside the company and abroad: This is because India is seen as an emerging center for outsourcing of clinical trials for the Pharmaceutical MNCs.

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CONTD…
• • The problem of spurious drugs has to be tackled. Most of the cases relating to spurious drugs remain undecided for years. Hence there is a strong need for setting up separate courts for speedy trials of such offences. Each state should set up accredited testing laboratories that are well equipped and adequately staffed. The staff should be trained well for drawing samples for test and monitoring the quality of drugs and cosmetics moving in the State.

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LEVERAGING TRADITIONAL KNOW HOW
• • India should exploit its know-how in herbal medicines Since these medicines do not come under the purview of the TRIPS regime and the research in new chemical entities involves millions of dollars of investment, the Indian companies should engage in R&D in herbal medicine The companies should try to exploit the Indian traditional knowledge in ayurveda and herbal cures and file as many patents for herbal medicine as they can For this the government should set up R&D laboratories undertaking research exclusively in the area of herbal medicines and support the companies in their research and patent filing
The government should encourage setting up of USFDA-compliant plants by providing tax holidays for a specified period so that the Indian companies can exploit the opportunity arising out of patented drugs and take up marketing of generics in the developed countries like USA

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India is poised to revolutionise biotechnology just as it did the IT industry. -The Economic Times